Exploration Development Incentive legislation passes

In good news for small exploration companies, legislation implementing the Exploration Development Incentive (Incentive) passed the Federal Parliament on 3 March 2015 and is currently awaiting royal assent.

The Incentive allows eligible exploration companies to convert tax losses to ‘exploration credits’ which are then distributed to shareholders who may claim a tax deduction.  

To recap the key points:

1. An exploration company must have no taxable income for the relevant year to be eligible to apply for the Incentive;
2. Expenditure must be incurred from 1 July 2014 in Australia on ‘greenfields’ exploration for minerals to be eligible for the Incentive;
3. The Incentive is capped at $100 million over the next 3 financial years;
4. Where a company uses the Incentive to distribute exploration credits to its shareholders, it will reduce its tax loss by the amount distributed; and
5. Companies must decide to provide exploration credits to either all shareholders or only those shareholders issued shares after 30 June 2014.

If you would like further information on how your company may be able to utilise the Incentive, please contact one of HopgoodGanim Lawyers' Taxation or Resources and Energy team members.